An early-stage innovation company (ESIC) is a company that has high growth potential, can scale, addresses a broader than the local market, and has competitive advantages. ESIC companies can provide investors with the following tax incentives:
- A 20% non-refundable tax offset on investments, capped at $200,000 per investor per year.
- A capital gains tax exemption, provided investments are held for at least one year and less than ten years.
The tax incentives are subject to the following conditions:
- That the investor and the innovation company are non-affiliates and the investor owns less than 30% of the company.
- They were limiting the investment amount for non-sophisticated investors to qualify for the tax offset to $50,000 or less per income year.
The tax incentives will only be available for investments in companies that:
- Satisfy a 100-point innovation test or are companies that are genuinely focussed on developing for commercialisation new or improved products, processes services or methods and can demonstrate that specific requirements in relation to the commercialisation of the innovation are satisfied (for example, that the business related to the innovation has high growth potential, and the company has the potential to scale its activities to take advantage of the growth potential).
- Were incorporated during the last three income years.
- Are not listed on any stock exchange.
- Have expenditure of less than $1 million in the previous income year.